L&G Target Date Fund: Steady, Safe and Subpar

Target date funds are marketed as the worry-free route to retirement. Simply choose the year you plan to retire, and the fund manager does the rest – shifting your investments away from risk and towards “safety” as the target year approaches.

The L&G PMC 2035–2040 Target Date Fund (Pn 3) is a prime example. Unfortunately, the numbers reveal that this version of “safety” may be costing investors dearly.

The 5-Year Performance

Between September 2020 and September 2025, the fund returned +36.5%.

That sounds acceptable – until you annualise it:

So investors compounded at just 6.4% per year.

Compare that with the benchmarks:

• MSCI World (GBP, TR): ~13% p.a.

• FTSE All-Share (TR): ~11.5% p.a.

In short: the L&G Target Date fund delivered about half the growth of a global index tracker.

£100k Over 5 Years

• L&G Target Date: £136,500

• MSCI World: £184,000

• FTSE All-Share: £172,000

That’s a shortfall of nearly £50,000 in just five years compared to global equities.

The Long-Term Cost of Mediocrity

The real pain of underperformance shows up in compounding.

That’s a staggering £800,000 gap between the L&G fund and global equities over 20 years.

Why the Underperformance?

1. Conservative allocation: By design, target date funds move into bonds and away from equities. But in a rising-rate environment, bonds have been a drag.
   

2. Fee drag: Costs are higher than a simple passive tracker. Even a 0.3–0.5% extra charge compounds heavily over decades.
   

3. Missed upside: The strategy sacrifices equity growth in pursuit of “safety,” but hasn’t protected investors meaningfully in downturns.

The Verdict

L&G’s 2035–2040 Target Date Fund does what it says on the tin: delivers a smoother ride. But the smoother ride has come at the expense of real returns.

Over five years, it has lagged badly behind both UK and global markets. Over 20 years, it could cost investors hundreds of thousands in lost growth.

For savers with a decade or more until retirement, the choice is stark: accept “safe mediocrity,” or embrace global equities and let compounding do the heavy lifting.

Because in pensions, it’s not volatility that kills wealth. It’s underperformance.

Disclaimer: This content is opinion based on the disclosed facts and sources above, including fund factsheets, benchmark data, and publicly available filings as at time of publication. An honest person could hold this opinion on those facts (Defamation Act 2013, s.3). I publish this in the public interest to inform UK savers about costs, risk, and performance of widely‑marketed products (s.4). This article is provided for educational purposes only and does not constitute financial advice or a personal recommendation. Past performance is not a reliable indicator of future results.

All investments carry risk, and the value of your investments can go down as well as up; you may not get back the amount originally invested. References to specific funds, indices, or strategies are for illustration only and should not be interpreted as advice to buy, sell, or hold any particular investment. If you are unsure about the suitability of any investment for your circumstances, you should seek advice from a regulated financial adviser. Alpesh Patel OBE www.campaignforamillion.com